The Ninth Circuit recently held that online retailer Amazon.com could be liable for infringing the trademarks of a watch manufacturer based upon Amazon’s Behavior Based Search technology. In a 2-1 decision intersecting trademark law and technology, the Circuit in Multi Time Machine, Inc. v. Amazon.com, Inc. reversed the Central District of California’s summary judgment decision. Specifically, the Ninth Circuit held that a jury could find that Amazon had created a likelihood of confusion under an “initial interest confusion” theory.

Multi-Time, a high-end military-style watch manufacturer, which owns the trademark “MTM Special Ops,” does not sell any of its watches on Amazon.com, and it prohibits any of its authorized distributors from doing so. When Amazon consumers search for “MTM Special Ops” on Amazon.com, the search results in several of its competitors’ watches without an explicit warning that Amazon does not sell Multi-Time watches. This is due to Amazon’s Behavior Based Search technology, which tracks customer searches, views, and purchases, and returns future search results based on past behavior. For example, if enough customers search for product “X” and ultimately view and purchase product “Y,” eventually searches for X will return search results for Y.

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Unlike Amazon, similar retail websites, such as Buy.com and Overstock.com, explicitly state in the search results that none of the products match the search query if the retailer does not offer that product. Moreover, at the top of Amazon’s search results page, “MTM Special Ops” is written in the query field, directly below the search line, and again immediately after the words “Related Searches.” Thus, consumers “might be confused into thinking a relationship exists” between the competitors whose watches Amazon does sell and plaintiff, and consumers “might look into buying a [competitor’s] watch, rather than junk the quest altogether and seek to buy [plaintiff’s] watch elsewhere.”

The majority explained that “[i]nitial interest confusion occurs not where a customer is confused about the source of a product at the time of purchase, but earlier in the shopping process, if customer confusion creates initial interest in a competitor’s product.” The Court went on to explain that “[e]ven if that confusion is dispelled before an actual sale occurs, initial interest confusion still constitutes trademark infringement because it impermissibly capitalizes on the goodwill associated with a mark and is therefore actionable trademark infringement.”

The Court also determined that the “defendant’s intent” factor weighed in favor of infringement because Amazon received complaints from vendors and customers regarding similar search result problems. Amazon did nothing to address the complaints and did not disclose how the behavior-based search operated – therefore, the Court held that a jury could infer that Amazon intended to confuse its customers.

Judge Silverman dissented. He explained that, “[b]ecause Amazon’s search results page clearly labels the name and manufacturer of each product offered for sale and even includes photographs of the items, no reasonably prudent consumer accustomed to shopping online would likely be confused as to the source of the products.”

While the Ninth Circuit’s decision in Multi Time Machine does not yet establish any liability for Amazon, it is significant in that it permits a trademark owner to bring suit over search results shown by online sellers, even those that disclose the source of the products. This ruling may trigger more trademark lawsuits against other online retailers relating to the manner in which they display their product search results. Online retailers may need to reconsider their search technology and perhaps disclose that they do not carry the product searched before showing other suggestions.